Prompt Payment Act: Military Exchanges Had Problems in Paying on Time
AFMD-88-17
Published: Feb 09, 1988. Publicly Released: Mar 10, 1988.
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Highlights
In response to a congressional request, GAO reviewed the military exchanges to: (1) determine whether the exchanges were complying with the Prompt Payment Act; (2) evaluate their payment procedures and internal controls for ensuring timely payments; and (3) obtain information on vendor complaints and exchange initiatives to resolve payment-timing problems.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | The Secretary of Defense should direct the Secretaries of the Army, the Air Force, and the Navy to improve payment timeliness by military exchanges by enforcing policies to record the specific dates needed to calculate exactly when bills are due and to retain applicable supporting payment documentation long enough to allow research on payment inquiries. |
AAFES reemphasized the importance of this policy to its vendor payment offices. NAVRESSO has developed and implemented measures to facilitate timely payment and has initiated on-going training classes. On November 2, 1987, NAVRESSO notified its payment offices to comply with documentation retention requirements.
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| Department of Defense | The Secretary of Defense should direct the Secretaries of the Army, the Air Force, and the Navy to improve payment timeliness by military exchanges by periodically reviewing whether payment due-date terms on the automated payment systems are consistent with contractual provisions. |
AAFES internal auditors have added this to its audit checklist. A review of the contracts and file maintenance was completed in June 1988, which found major discrepancies. NAVRESSO has completed a first cycle of on-going training regarding the importance of payment terms and ADP system enhancements. The procurement management team has added a review of payment terms to its audit checklist.
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| Department of Defense | The Secretary of Defense should direct the Secretaries of the Army and the Air Force regarding their military exchanges to clarify their regional accounting procedures manual to specify that improperly taken discounts should be refunded voluntarily. |
As an interim measure, on April 14, 1988, a memo was sent to managers reemphasizing proper discount payment procedures. The Mahual, ESM 55-11, was revised on January 30, 1989 to reflect the recommended change.
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| Department of Defense | The Secretary of Defense should direct the Secretaries of the Army and the Air Force regarding their military exchanges to establish due-date terms in written agreements for any types of payments that will be made in other than 30 days. |
AAFES management has established a policy instructing field payment offices to pay vendors in accordance with prompt payment provisions instead of immediately after receipt of an invoice and acceptance of the goods.
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| Department of Defense | The Secretary of Defense should direct the Secretaries of the Army and the Air Force to require the exchange system to incorporate additional automated features as part of the ongoing systems modification work. The regional and headquarters payment systems should include features to: (1) routinely compute an interest penalty payment for invoices paid after a grace period; and (2) recalculate a payment due date based on terms for the full invoice amount when an offered discount period has expired. Such revisions would allow more efficient administration of prompt payment objectives and provide the same system capabilities already available in the Navy exchange payment systems. |
AAFES approved a $48-million program to improve its management information systems, including accounts payable. The upgrade will provide faster and more reliable payments. The contract was awarded on September 30, 1988 to Coopers and Lybrand. AAFES is developing payment system enhancements targeted for the summer of 1990. AAFES work will be phased into Coopers and Lybrand's 5-year effort.
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Topics
Accounting proceduresFinancial managementInternal controlsLate paymentsMilitary cost controlMilitary facilitiesPost exchangesPrompt payment discountsMilitary forcesInterest penalties